Remarks of John E. Potter President and CEO, Metropolitan Washington Airports Authority Aero Club of Washington

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Happy New Year! Thank you for inviting me to speak to such a distinguished aviation audience. I’ve been at the Metropolitan Washington Airports Authority for about 2 ½ years. Coming into this job, I had a degree of comfort because during my years at the Postal Service, I thought I had acquired a good understanding of aviation.

After all, the modern aviation industry was jump-started by the Post Office Department and the need for speedy movement of mail and packages by air. The revenue from mail funded the establishment of air service across the country.

It was a win-win situation for the Post Office Department, the airlines and the public, who benefited from faster mail delivery and establishment of regular air service. When I left the Postal Service, we were spending about $3 billion a year on air transportation.

I quickly learned that there was much more to it. As with any industry, there was a whole new language to learn, new “acronyms.” Every time I think I have it, here comes a new twist. For example, it makes sense that you keep the area at the end of a runway clear. So when people started talking about an RSA, or “runway safety area” I got it. But then I was in another conversation about runways. I made a statement -- all proud of myself -- and threw in my new acronym – “RSA.” And I was told that – no – actually, we’re talking about the “RPZ.” – Runway Protection Zone. So, still much to learn – and I continue to learn every day.

So, in preparing for this speech, and knowing that I was speaking to an audience that knows far more than I ever will about the inner workings of aviation, I decided that the best use of your time today would be to share a few perspectives on the importance of aviation to the economy and some challenges faced by the industry and how we, as an aviation community, need to work together going forward to assure future growth and maximum contribution to the overall economy.

One of the first events I attended after joining the Authority was the “Airport Cities” conference. It became obvious as I listened to a number of speeches that without connecting air travelers to ground transportation, an airport is a mere island. Therefore, there is a real need for airport planners to work with surrounding communities on the highway and transit networks supporting air passengers.

I was surprised to hear Reagan and Dulles being held up as shining examples of integrated development beyond the perimeter of airport property. But when I thought about it, it made perfect sense – after all – over 25,000 people are employed at the airports. If you look carefully at Reagan, the area around the Airport has become a major business center in its own right. Just look at all the hotels and office buildings in Crystal City.

Moreover, Reagan Airport has one of the best – if not the best – transit connections of any airport in the country. In fact, it’s the number-one airport in America in terms of public transportation… because the Metro station – connected to the terminals by pedestrian bridges – has easy access to downtown D.C. and the entire Washington metropolitan area. Reagan’s proximity to downtown and its access to affordable convenient transit systems make it the ideal choice for D.C. tourists and business travelers.

Dulles has spurred an even greater amount of commercial and residential development. Since President Kennedy christened it in 1962, Dulles and the area between it and downtown D.C. have been transformed from sparsely populated rural countryside into a teeming corridor of commerce that is one of the top locations for job growth and personal income in the nation, driven by the highways built to access the airport.

And, as many of you know, working with our partners in Fairfax and Loudoun Counties, the Commonwealth of Virginia and the federal government, the Airports Authority is constructing an extension of the Metrorail System – in the highway right-of-way – out to the airport and beyond. The Metro will benefit air passengers as well as address traffic congestion issues and jump-start another round of residential and commercial economic development throughout the corridor.

In short, a case can easily be made that transportation, both air and ground, are major catalysts for economic development, especially when they work in tandem. I share this observation because it is important to step back every once in a while to take a look at the big picture. The outcome here in the Washington area is the product of the commitment of many people who understood the long-term need for transportation infrastructure in the region to support a growing economy.

Today, airlines are coming out of a very challenging period that began with the 2008 economic downturn. Yes, the contractions have been painful to deal with: reduction in the number of flights, smaller aircraft, employee layoffs, bankruptcy proceedings, mergers, and shrinking budgets. The good news is the industry has tightened its belt and airlines are profitable. In addition, the economy is moving in the right direction.

The planning now needs to shift from short-term to long-term, from limited investment to modernization and “smart” growth. And some of this planning is already underway. New airplane orders are skyrocketing. Fuel efficiency and passenger satisfaction will help the bottom line and make air travel even more attractive. But the airlines cannot do all this on their own.

Just as there have been benefits from governments working closely with airports to assure ample efficient ground transportation for travelers, so too is there a need for close coordination among all those touching customers at airports, such as the FAA, TSA, CBP, concessionaires, airlines and airport management. In many respects, the customer experience is a chain of handoffs between these entities and the future of customer satisfaction is dependent on every link in the chain providing top service.

We all have to recognize our roles and commit to a common vision of the future. Let me give a quick example of an area that begs for enhanced planning and coordination. One of the bright lights for airports and airlines in recent years has been the growing demand for international air service as business has become more and more global and new tourism markets have opened.

The United States has set a goal of attracting 100 million international visitors by 2021 – an increase from the 67 million international visitors to our country today. This influx of new travelers would add $250 billion to our economy every year. The challenge posed by this is that it will put an even greater demand on those airport functions dedicated to servicing the international traveler – services which today are already stretched thin.

To be frank, I feel that we are merely reacting to this challenge, as opposed to having a definitive long-range strategy. And I am sure that I speak for some of my partners at the airport.

Imagine for a moment that you have a new job. You are put in charge of Customs and Border Protection for all the airports in the United States. Here is the hand you are dealt:

Growing demand for services at U.S. airports, with huge hourly peaks when mega-aircraft land and growing complaints from passengers who may wait in line for an hour or more.

Highly uncertain budget – limited / one-time adjustments such as 2014 budget adjustment that authorizes the hiring of 2,000 new employees, but no guarantee that the funds will be there in the future to pay for them.

Limited capital to modernize.

Limited funds to promote innovations like Global Entry.

Restrictive regulations on how you schedule and staff your operations.

Traveler fees that go into the federal coffers and critics who call any adjustment in fees a new tax.

Unlimited well-intended third parties offering comment and solutions such as: airport procured customer kiosks, off-shore pre clearance Customs locations staffed from limited U.S. resources, temporary budget adjustments, airports providing some short term financing, just to name a few.

In short, the path that we are on with Customs and Border Protection is, at best, fractured. If I learned anything at the Postal Service, it is that the right fix to such a challenge is comprehensive and structural – not short-term or piecemeal. If a government agency performs a business, then it needs the flexibility to run like a business.

In the 1960s, the USPS was the Internet of the day – yes, I did say Internet. People were moving away from paying their bills in person at retail outlets and utility offices. They preferred bills by mail and paying using checks through the mail. This put tremendous pressure on the Post Office to meet a quickly growing demand for increased service.

But the funds to do this were nowhere in sight. This was because postage rates were legislated, and it was politically incorrect to raise stamp prices. In fact, at that time, 20 percent of Post Office operating revenues came from appropriations, because postage revenue did not cover operating costs. And, because the Post Office was not a top priority for the limited federal dollars, there was no investment in facilities, vehicles or research and development to improve efficiency. As a result, mail service declined and businesses and the economy were negatively impacted.

The solution that was devised was long-term and structural. It was to take the USPS off appropriations, allow rates to be adjusted – by someone other than Congress – to pay for the services and to give postal management access to capital to invest in equipment and infrastructure to improve service and efficiency.

These freedoms enabled the Postal Service to operate far more like a business and enabled it to respond to the challenges of the times. But there were limits to the freedoms granted, and those limits are contributing to the challenges being seen today at the Postal Service.

In a similar way, some 25 years ago, Reagan and Dulles Airports faced a similar challenge. Demand for air travel was growing, and funds were needed to modernize terminals, parking and runways. However, as federal airports, they competed for limited federal budget dollars. The solution, again, was long-term and structural – the creation of the Metropolitan Washington Airports Authority.

It got the airports off the federal budget, allowed access to the capital markets and was the key to the modernization of our National Capital’s Airports. Of course, it wasn’t perfect legislation – Reagan is regulated, and BWI was left out – and I can go on. But the important point from both examples is that structural approaches, designed to provide long-term solutions, were successful.

So Customs and Border Protection is facing the same sort of challenge today. And the myriad of approaches to the challenge is not achieving the desired result. And even if they did for a very short time, it is likely to break, as those entities outside of CBP re-evaluate their discretionary commitment of time and funds to support the screening process.

Short term fixes like these lack accountability. If we all desire a CBP that has the independence to carry out its function, the flexibility to efficiently staff its operations, the funding to respond to changing demands, the capital to modernize its processes – so it can be held accountable for its performance – then we have to embrace structural change.

We have to work to help our partners in CBP obtain the tools they need to provide the service we all desire. We all will benefit from this. We don’t want tourists to be turned off by what they hear about or experience at U.S. Customs. A traveler’s first experience in America should be a good one. For America’s aviation industry to be competitive, we must ensure that the customer experience throughout the country is satisfying and predictable.

The FAA faces similar challenges – though they are less apparent to the public. Just think about funding:

The FAA gets 20 percent of its funding through appropriations – and federal budgets will be tight for many years to come.

The Aviation Trust Fund is in trouble.

Fuel efficiency is on the rise from new, more-efficient aircraft, and Next Gen efficiencies will further reduce jet fuel tax revenues.

Ticket prices no longer incorporate services such as baggage fees, which are not taxed. Airline ticket revenues are dropping as a percentage of the revenues they raise.

Prices are frozen. Five dollars to register a private aircraft? Come on!

The FAA situation deserves a very hard look, with all solutions on the table – including structural reform – so that the very important work of growing and modernizing the best aviation system in the world continues to provide America an economic advantage in the global economy.

Travelers have choices – such as video conferencing, trains, buses, their own cars, visiting other countries, or even just staying home. We can’t allow anything to detract from their experience, particularly when the challenges are solvable – things like obtaining a visa, getting through Customs, getting to and from our airports, getting through TSA, and having safe and modern runways, state of the art air traffic control and clean and welcoming airport facilities.

Careful planning and information-sharing will go a long way toward success in the future. We all know making this kind of change isn’t easy in a government environment at the local, state and federal levels. As we address these long-term issues, we cannot stop doing those things that are making a difference.

Here in Washington, Reagan and Dulles Airports are working with TSA to help promote and strengthen the Pre-Check program. And we’re working with our colleagues in Customs at Dulles to find, test and implement innovative new ways to make the process faster, easier and more pleasant for international passengers and to increase participation in Global Entry. We are extremely proud that Reagan and Dulles Airports are national leaders in working with our colleagues at these agencies. Some of the country’s highest percentages of Pre-Check and Global Entry passengers are at Dulles and Reagan.

I’ll leave you with a final thought: The future of America’s aviation industry is in our hands. We can sit back and wait for a crisis that will force change, or we can work together – setting the greater good of a strong aviation industry as our top priority – and collaborate on making the changes that are essential. Because many of the policies and processes we have today – even though they made sense and worked well in the past – won’t fit the needs of tomorrow’s world.

The health and success of the aviation sector will help determine which countries and societies will be the leaders of the global economy of the future. Those with the strongest, most efficient, best financed and most customer-focused aviation industries will have an advantage. If we want the United States to stay in the lead, then our discussions must be centered on how we – as partners in this very complex, very inter-related and very important industry – can work together to make our industry as strong and successful as it can be.

So I hope this new year brings a renewed spirit of cooperation, camaraderie, trust and coordinated action among all of the very important segments of this very important industry and that we move forward together into a future that benefits each of us, our entire industry and America’s position in the world.